Twitter deal stalls, ‘cannot move forward’ until Elon Musk gets clarity on number of fake accounts

Elon Musk says he can’t go ahead with his $44 billion buyout of Twitter unless he knows how many profiles are fake.

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In a report earlier this month, Twitter claimed that in the first quarter, just under 5% of its monetizable daily users (mDAUs) were fake or spam profiles.

Musk, on the other hand, estimates that about 20% of Twitter profiles are fake or spam, and he fears that the number may be much higher, as reported.

“My offer was based on Twitter’s SEC filings being accurate,” Musk posted early Tuesday morning. “Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”

Musk alleges that many of the spam profiles are “bots,” although Twitter’s SEC report makes no use of the term. Fake or spam profiles sometimes referred to as bot accounts, are operated by machines rather than humans. However, automatic Twitter bots, that are designed to tweet things at specific times, might be good or bad, and Twitter does not block them completely.

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Twitter declared later Tuesday, just after Elon aired his worries, that it is ready for the transaction at the pre-agreed cost and that it has made a proxy with the SEC.

In premarket trade on Tuesday, the company’s stock fell 2.46 percent. A Twitter spokesman did not immediately reply to a request for comment from CNBC.

Musk’s remark came only hours after Twitter CEO Parag Agrawal published a lengthy thread against spam on the social media platform.

Twitter’s spam estimates, according to Agrawal, a software engineer, are based on several human evaluations of thousands of profiles that are picked at random over time.

External parties can’t compute the precise amount of spam accounts on Twitter, he added, since it takes both public & private information, which Twitter doesn’t disclose.

“Externally, it’s not even possible to know which accounts are counted as mDAUs on any given day,” he claimed.

According to Jefferies analysts, Musk appears to be attempting to drive down the price in response to the latest market sell-off.

“Elon Musk’s recent comments suggest he is trying to negotiate a lower offer price,” In a research report, equities analyst Brent Thill & equity associate James Heaney wrote.

“We believe that Musk is using his investigation into the % of fake TWTR accounts as an excuse to pay below $54.20/share. In reality, the NASDAQ COMP is down 25% YTD [year-to-date] and Elon Musk realizes that he may be overpaying for the asset.”

Musk has stated that his staff is doing its own investigation into the number of fake accounts on the site, but specialists in the fields of social media, misinformation, and statistical analysis think his proposed method for additional investigation is tragically inadequate.

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